While Central Statistics Office estimated nominal GDP growth rate at 11.9% for 2016-17, the finance ministry has assumed 11% growth during the year, over which it has projected a growth rate of 11.75% for 2017-18. Photo:

New Delhi: In an unusual step, the Union Budget 2017 presented by finance minister Arun Jaitley on Wednesday has significantly cut the nominal gross domestic product (GDP) growth estimate for 2016-17, holding that the advance estimates released by the statistics department last month do not include the “trends of decline in growth rate”, without naming demonetisation.

While the Central Statistics Office (CSO) estimated nominal GDP growth at 11.9% for 2016-17, the finance ministry has assumed 11% growth during the year, over which it has projected a growth rate of 11.75% for 2017-18.

“We want to be conservative. We want to be certain that we achieve the fiscal deficit target because the CSO data was up to October. Because if you go for higher expenditure assuming higher denominator and that denominator does not materialize, you would have incurred the expenditure but you will miss the fiscal deficit target,” economic affairs secretary Shaktikanta Das said in an interview on Thursday.

However, Das declined to comment on whether it means real growth in 2016-17 will also come down by 90 basis points. “We have taken a certain level of nominal growth so that we end the year 2016-17 with a fiscal deficit of 3.5% of GDP,” he added.

CSO last month cut India’s growth estimate for 2016-17 to 7.1% from 7.6% even without taking into account the impact of demonetisation of high-value currency.

The medium-term fiscal policy statement released along with other budget documents on Wednesday said the adjustments have been done on account of trends of decline in growth rate, expected to run out in the last two quarters of the current fiscal year, in maximum.

“Since the CSO Figures could not fully factor these on account of limited period data, as they had to advance their projection taking into account the growth figures till October, 2016 Government has moderated the estimated nominal GDP growth rate to factor for the above,” it said.

However, the budget document said with the negative impact on GDP growth not expected to continue beyond the current fiscal year and the likelihood of a bounce back in consumption demand from the first quarter of 2017-18 high, the medium-term growth prospects of the Indian economy appear quite positive.